Kingston Maurward College v The Commissioners for HMRC

In a substantive tax appeal, the parties must identify the issues and evidence needed to meet alternative cases. A respondent’s statement of case is assessed together with the appellant’s pleaded case. A denial is not inadequate merely because it does not particularise objections to an alternative case which the appellant never advanced.

A tribunal will normally determine the whole appeal at the final hearing on the evidence before it. It may decide issues in principle and leave quantification for later, but that is a case-management discretion. The Upper Tribunal will not interfere unless the decision falls outside the generous ambit of that discretion.

The appellant, a rural studies college, appealed against the First-tier Tribunal’s dismissal of its appeals concerning claims for additional input VAT. The FTT accepted that grant-funded education supplies were made for consideration, but rejected the appellant’s case that its activities formed a single integrated business and that the claimed input tax was residual input tax.

On appeal, the appellant alleged that HMRC’s statement of case had inadequately pleaded the residual input tax issue. It also argued that the FTT should have decided only the legal issues in principle and left the amount of recoverable tax to agreement or further determination. The appeal concerned procedural fairness and case management.

1. Appeal dismissed. HMRC’s statement of case was not inadequate. The requirement in Rule 25(2) of the FTT Rules to set out the respondent’s position must be applied in the context of both parties’ cases. The appellant’s case was an all-or-nothing argument that its educational and commercial activities were a single integrated business. HMRC had expressly disputed that position and stated that attribution was required, including whether input tax related exclusively to exempt supplies.
2. The principles in Allpay Limited v HMRC [2018] UKFTT 273 (TC) and Fairford Group plc v HMRC [2014] UKUT 329 (TCC) were accepted. Parties must state the key legal and factual parts of their cases sufficiently to permit preparation and avoid procedural ambush. Those principles did not require HMRC to plead objections to an alternative case which the appellant had not advanced. If the appellant wished to argue that some input tax was residual even if its single-business argument failed, it had to plead that alternative and adduce evidence.
3. The FTT was entitled to find that the appellant had not established residual input tax. The issue required examination of the particular inputs and their use, and was a mixed question of fact and law. Without evidence identifying the inputs and their links to taxable and exempt supplies, any calculation would have been guesswork.
4. The FTT also acted within its discretion in making a final decision rather than issuing a decision in principle. The hearing was listed as a final hearing, no agreement or prior direction limited its scope, and the evidence necessary to determine attribution had not been provided. Authorities recognising that a tribunal may arrive at a figure between the parties’ cases did not require a further hearing or remittal.
5. In exercising case-management discretion after or during a substantive hearing, relevant considerations include the scope of the hearing, any express or implied agreement altering that scope, and whether a direction was sought. The Upper Tribunal should intervene only where the FTT’s decision is plainly outside the generous ambit of its discretion.

• Upper Tribunal (Tax and Chancery Chamber): appeal dismissed.
• First-tier Tribunal (Tax Chamber): appeals against HMRC’s rejection of the input VAT claims dismissed: [2021] UKFTT 127 (TC).